July 16, 2009

Study: EIB loans cost Africa tax dollars

by Sam Savage

Dodging tax laws costs African countries five times what they are given in aid in the course of a year, a group of seven economic watchdogs said Thursday.

A study released by a collection of non-government groups called Counter Balance said loans supporting projects in Africa often go to companies that set up subsidiaries in Mauritius, an island nation off the coast of East Africa. The companies then do business in countries that have tax agreements with Mauritius, the EUobserver reported Thursday.

The companies, as a result, pay a fee in Mauritius, but often pay no other taxes, says the study, called Flying in the face of development -- How European Investment Bank loans enable tax havens.

Of singular importance is the European Investment Bank, which is charged by the EU with boosting African development through bank loans.

The European Investment Bank does not have much overview of what they (other banks) then do with the money, said Marta Ruiz, a policy officer at the European Network for Debt and Development.